UK manufacturing survey signals cautious optimism

Published: 08 September, 2009

The latest quarterly Manufacturing Institute survey of business challenges among manufacturers in Northwest England signals improved confidence, with 48% of respondents stating that they expected their business to grow over the next 12 months, which was more than double the percentage for the previous quarter.

The number of businesses expecting business to remain static over the next 12 months remained at one third of recipients, while those more pessimistic businesses expecting business contraction had reduced from 50% to 23%. According to the survey, the major challenge facing manufacturers is the need to reduce production costs, with the cost of raw materials, reduced sales and reduced margins also highlighted as key issues.

Respondents were asked how the current climate is affecting investment decisions - revealing that continuous improvement, marketing activity and new product development were areas of higher investment compared to the previous year, while expenditure had been cut on staff and inventory.

Adam Buckley, head of programmes for The Manufacturing Institute said: "The evidence points to a less gloomy outlook, but there is no denying that conditions remain extremely tough, especially for those in industries supporting the housing, automotive and construction industries which are exposed to the full brunt of recession.

“We would urge manufacturers to access free support through the government's Manufacturing Advisory Service North West www.masnw.co.uk that provides practical help that"s proven to cut costs. This highly successful support programme delivers hands-on, practical advice and assistance from experts with years of achievement in industry.”

Additional tentative signs of recovery were highlighted by the recent release of ONS Index of Production statistics. Graeme Allinson, head of manufacturing, transport and logistics at Barclays Commercial Bank, commented on the ONS figures: “In the past few months we’ve seen production pass its worst point. However, experience tells us that there is no smooth road to recovery. Although the figures indicate a healthy move in the right direction, businesses that we talk to on a daily basis are watching for more long term trends around these statistics, pointing towards a sustained increase in demand. The general uplift in the economic markets parallels the positives coming out of the manufacturing sector and the real test of whether these figures are taking things in the right direction will be seen in the long term, not in the here and now.

“As well as the ONS figures’ welcome news, the PMI (Purchasing Managers Index) data for July has presented the first manufacturing expansion since March 2008, and importantly similar increases are visible around the world. The current levels of Sterling against the Euro will help to sustain UK production levels. British goods entering the euro-zone remain a value proposition, bolstering their competitiveness as global production moves forward.

“An interesting time lies ahead in determining the true picture of the manufacturing sector from production statistics. The continued likelihood of extended summer closures over coming months may see a fall in production levels, but the overall effect of this will be leaner, more effective businesses when they return.”